I received an offer to refinance my loans at a “fixed” rate of 2%, which is a big savings from my current average of 7.75% through the federal government. I am concerned about some of the terms in the Loan Contract from the bank. The bank requires that you “bank” with them. The contract requires that you promise to open a checking account, maintain a minimum balance, have direct deposit, and pay the loan each month from your account. They state their intent is to get my future business by helping me now. However, what’s also stated in the contract is that the bank can consider me to be in default if I break any of the promises I made in the loan contract, and have the discretion to increase my interest rate by 5%.

Essentially, if for some reason I were to not have direct deposit because I opened up my own law firm or had to go on disability for a period of time, they could consider me to be in default because I do not have direct deposit and raise my interest rate from 2% to 5%, despite me continuously paying my loan payments on time.

Do you have any experience or knowledge of private lenders with terms similar to these? I am just scared that although this sounds great because of the potential huge savings, that the bank will try and raise my interest rate at their first opportunity. If you are familiar with a situation like this, I would greatly appreciate your input.